Guidance for electric utilities not subject to Federal Energy Regulatory Commission jurisdiction

(a) In general Not later than two years after the date of enactment of this Act, the Secretary, in coordination with the Commission and State regulatory authorities, shall develop and publish on a publicly available website of the Department of Energy guidance to support State regulatory authorities in establishing frameworks under which covered electric utilities may recover a portion of verified cost savings attributable to a covered utility action as an incentive. (b) Minimum elements The guidance under subsection (a) shall include— (1) guidance, developed in accordance with subsection (c), for determining the baseline performance of a covered electric utility absent a covered utility action; (2) guidance, developed in accordance with subsection (d), for determining the cost savings attributable to a covered utility action; (3) guidance for the measurement and verification of a covered utility action, and any cost savings attributable to such action, by an independent evaluator determined appropriate by the State regulatory authority concerned; (4) guidance on potential mechanisms by which covered electric utilities may recover a portion of the verified cost savings attributable to a covered utility action, including through the provision of rate adjustments by State regulatory authorities; and (5) such other elements as the Secretary determines appropriate to ensure the framework specified in subsection (a) is transparent, performance-based, cost-effective, and consistent with State ratemaking practices. (c) Methodology for determining baseline performance (1) In general In developing the guidance under subsection (b)(1), the Secretary, in coordination with the Commission, shall— (A) consult with State regulatory authorities, Independent System Operators, Regional Transmission Organizations, and independent evaluators determined appropriate by the Secretary regarding such guidance; (B) include in such guidance technical guidance for normalizing data to ensure the baseline performance of a covered electric utility accounts for variability in exogenous factors, such as variability in— (i) weather; (ii) demand over time; (iii) upgrades, interconnections, or operational changes made by other utilities, Independent System Operators or Regional Transmission Organizations, or other entities determined relevant by the Commission; or (iv) other conditions affecting demand or generation, as determined by the Secretary; and (C) ensure such guidance supports consistent treatment across covered electric utilities within each category described in subsection (e). (2) Support from National Laboratories The National Laboratories shall provide such technical support as the Secretary determines necessary to carry out this subsection. (d) Guidance on determining cost savings In developing the guidance under subsection (b)(2), the Secretary shall— (1) include in such guidance— (A) principles to ensure that cost savings attributable to a covered utility action are calculated in a manner that takes into account price proxies for the value of electric energy and the baseline performance of the covered electric utility; and (B) tools, technical support, and reference data to assist State regulatory authorities in applying the principles specified in subparagraph (A); and (2) ensure such guidance supports consistent treatment across covered electric utilities within each category described in subsection (e). (e) Applicability to utility market structures In carrying out subsection (a), the Secretary shall develop separate guidance for each category of covered electric utilities as follows: (1) Vertically integrated utilities. (2) Covered electric utilities that own or operate transmission infrastructure but not distribution or generation infrastructure. (3) Covered electric utilities that own or operate distribution infrastructure but not transmission or generation infrastructure. (4) Covered electric utilities that own or operate distribution and transmission infrastructure but not generation infrastructure. (f) Revisions Upon the publication of each report under section 6, the Secretary shall determine whether to revise the guidance under subsection (a), taking into account the contents of such report and the recommendations included therein.